Loading the player...

What is a 'Debit Card'

A payment card that deducts money directly from a consumer’s checking account to pay for a purchase. Debit cards eliminate the need to carry cash or physical checks to make purchases. In addition, debit cards, also called check cards, offer the convenience of credit cards and many of the same consumer protections when issued by major payment processors like Visa or MasterCard. Unlike credit cards, they do not allow the user to go into debt, except perhaps for small negative balances that might be incurred if the account holder has signed up for overdraft coverage. However, debit cards usually have daily purchase limits, meaning it may not be possible to make an especially large purchase with a debit card.

BREAKING DOWN 'Debit Card'

Debit cards serve a dual purpose: they allow the user to withdraw money from her checking account through an ATM or through the cash-back function many merchants offer at the point of sale, and they also allow the user to make purchases. ATM cards, by contrast, only allow the user to withdraw money from an ATM, while credit cards only allow purchases unless the credit card holder has a PIN-enabled cash advance feature (and the cash advance will incur interest, unlike withdrawing cash from a checking account).

Debit card purchases can usually be made with or without a PIN. If the card has a major payment processor’s logo, it can be run as a credit card, and the cardholder won’t need to take the risk of exposing their PIN number. The money will still come directly out of the cardholder’s checking account and there won’t be any finance charges when the debit card is run as a credit card. Some debit cards also offer reward programs similar to credit card reward programs, such as 1% back on all purchases.

Every transaction made with a debit or check card will appear on the account holder’s monthly statement, making it easy to keep track of purchases. Consumers are effectively making their purchases in cash – that is, with money they actually have, as opposed to money borrowed on credit – but unlike cash purchases, there’s no way to lose track of amounts spent on a debit card. And while lost or stolen cash is gone forever, a lost or stolen check card can be reported to the bank, which can deactivate the card, remove any fraudulent transactions from the cardholder’s account and issue a new card.

RELATED TERMS
  1. Cash Back

    Cash back can refer to two different kinds of card transactions: ...
  2. Authorized Amount

    A sum that a merchant transmits to a credit or debit card processor ...
  3. Carding Forum

    A website dedicated to the sharing of stolen credit card numbers. ...
  4. Bank Card

    Any card issued against a depositary account, such as an ATM ...
  5. Credit Card Funding

    The ability to electronically fund a new account, business, or ...
  6. Credit Card

    A card issued by a financial company giving the holder an option ...
Related Articles
  1. Personal Finance

    Credit vs. Debit Cards: Which Is Better?

    Be strategic about the card you choose.
  2. Personal Finance

    Debit Cards: Why They're Not As Safe As You Think

    Ditching your credit card can be a smart move, but debit isn't yet an equal alternative.
  3. Personal Finance

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
  4. Tech

    How To Keep Your Debit Card Transactions Safe

    Debit card use has become more popular than ever, but not every consumer knows what they need to do to make sure they keep their debit card safe.
  5. Personal Finance

    Debit or Credit at the Gas Pump: An Easy Choice

    Using credit rather than debit at the gas pump doesn't just provide more fraud protection. It also could give consumers lucrative benefits.
  6. Personal Finance

    How To Live Without A Credit Card

    Debit cards are more widely accepted and provide better fraud protection than in the past.
  7. Personal Finance

    Credit Card or Cash?

    Credit cards are convenient to use, but not always the best choice. Here are 5 times you shouldn't pay with a credit card – and 5 times you should.
  8. Personal Finance

    6 Reasons You Don't Need A Prepaid Debit Card

    We'll look at six situations where a prepaid debit card might seem like a good idea, but it really isn't necessary.
  9. Personal Finance

    How To Get Your First Credit Card

    Here's a rundown of how you can go about getting your first credit card.
  10. Personal Finance

    How Many Credit Cards Should You Have?

    National stats indicate most consumers have three or more cards - are you one of them?
RELATED FAQS
  1. What are the differences between debit cards and credit cards?

    Learn how the major difference between a debit card and a credit card is where the money comes from when a customer makes ... Read Answer >>
  2. Where are secured credit cards accepted?

    Repair a damaged credit history or establish one by opening a secured credit card account with a collateral deposit into ... Read Answer >>
  3. Am I responsible for fraudulent charges on my credit card?

    In the event that your credit card is stolen in the United States, federal law limits the liability of card holders to $5 ... Read Answer >>
  4. What is the difference between a prepaid credit card and a gift card?

    Although prepaid and gift cards are used in the same manner, a prepaid credit card can be used repeatedly, while a gift card ... Read Answer >>
Trading Center